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No light at end of tunnel as Pearson warns on profits

Pearson’s shares today crashed to a three-year low after the education and media giant warned that profits will be sharply lower again this year and suggested there will be little respite until “some time in 2015”.

Pre-tax profits fell just 2.3% to £391 million last year but adjusted earnings per share (EPS) slumped to 70.1p against 82.6p a year earlier, partly because of the weak US and UK education markets.

However, analysts were more concerned that chief executive John Fallon is forecasting EPS of between only 62p and 67p in 2014, in a “short but difficult transition” as he focuses on digital and emerging markets.

Fallon is pushing through what he says is “six years or more of restructuring in two years” — having begun the process just over a year ago when he took over from the long-serving Dame Marjorie Scardino.

He axed 3300 jobs last year, with a net loss of 2400 posts as he recruited in new markets, and more cuts are expected this year.

“Pearson grew very strongly through to 2010 on the back of some very good underlying growth,” said Fallon. “Since then, we’ve found underlying growth much harder to come by.”

Underlying revenues rose just 1% but profits at the Financial Times were strong. The Economist, in which Pearson has a 50% stake, had a record year. The shares briefly fell below £10, settling down 6.5% at 1006p.